On October 22, 2024, Authum Investment & Infrastructure Limited (Authum) announced that it has entered into a binding restructuring agreement with NITCO Limited, a publicly listed company. The agreement outlines a comprehensive plan to restructure NITCO’s significant debt load while positioning the company for growth. Authum has taken this step as part of a broader financial strategy aimed at enhancing value for stakeholders and ensuring long-term profitability.

Key Aspects of the Agreement

Restructuring Loans and Credit Facilities
Authum has agreed to restructure the loans and credit facilities that NITCO owes to the company. NITCO has an outstanding debt of approximately INR 2,875.81 crores, and the restructuring will include revised payment terms for the sustainable debt component.

Conversion of Debt into Equity
A significant aspect of this agreement is the conversion of part of the unsustainable debt into equity. NITCO owes approximately INR 1037.81 crores in unsustainable debt, and this debt will be converted into equity shares. This conversion will result in Authum acquiring around 45% of NITCO's expanded share capital on a fully diluted basis. This is a strategic move that not only reduces NITCO's debt burden but also strengthens Authum’s position in the company.

Fresh Equity Capital
As part of the restructuring, NITCO will issue fresh equity capital amounting to INR 350 crores to third-party investors. Additionally, NITCO’s promoters will infuse at least INR 225 crores into the company by way of fresh warrants or equity capital. This fresh capital will support NITCO in funding its business plan and positioning it for future growth.

Acquisition of Real Estate Assets
Another key component of the restructuring is the acquisition of real estate business assets by NITCO from its promoters and related parties. The real estate assets are valued at INR 300 crores, and this acquisition will enhance NITCO’s portfolio, particularly in the real estate and construction projects sector.

Objectives of the Restructuring

The restructuring is aimed at positioning NITCO for future growth by reducing its debt, raising fresh capital, and expanding its asset base. NITCO has outlined a detailed business plan that includes restructuring its operations in ceramic tiles, marble processing, and trading in vitrified and wall tiles. Moreover, the company plans to expand into real estate development and construction projects, which are expected to be key drivers of its future growth.

Authum believes that this restructuring will allow NITCO to overcome its financial challenges and provide the company with the best opportunity to maximize stakeholder value. The conversion of debt into equity is also seen as a crucial step in ensuring that the company's operations are sustainable in the long term.

Key Conditions and Timeline

The agreement includes several conditions that need to be fulfilled before the transactions can be fully executed. These include:

Shareholder approvals from NITCO.

Listing approvals from stock exchanges for the newly issued shares.

The entire restructuring process is expected to be completed within 180 days, subject to the necessary regulatory and shareholder approvals. However, this timeline may be extended depending on how quickly the approvals are obtained.

Financial Impact and Shareholding

Upon completion of the restructuring, Authum will hold approximately 45% of NITCO’s expanded share capital, making it a significant shareholder in the company. However, the exact percentage may vary depending on factors such as:

The finalization of the issue price for the new equity shares.

The subscription levels from other investors and third-party allottees.

This agreement represents a significant shift in NITCO’s shareholding structure and is expected to strengthen Authum’s influence over NITCO’s operations, particularly in its core areas of business.

Regulatory Approvals

As required under SEBI regulations, the restructuring and equity conversion will need to comply with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. All transactions will be carried out following the necessary pricing requirements laid down by SEBI and other relevant regulatory bodies.

Background of NITCO Limited

NITCO Limited, founded in 1966, is a well-established company engaged in the manufacture of ceramic tiles, processing of imported marbles, and trading of vitrified and wall tiles. In recent years, the company has also ventured into real estate and construction projects, expanding its business portfolio. Despite its diversification, NITCO has faced financial challenges, which prompted this restructuring.

Net Worth (March 31, 2024): INR (502.21) crores

Turnover (March 31, 2024): INR 327.83 crores

The company's turnover has declined over the past three years, highlighting the need for financial restructuring and fresh capital infusion. The turnover for the past three years is as follows:

FY 2021-22: INR 416.12 crores

FY 2022-23: INR 386.17 crores

FY 2023-24: INR 327.83 crores

NITCO’s shares are listed on BSE (Scrip Code: 532722) and NSE (Scrip Code: NITCO), making it a publicly traded company with a long history in the Indian manufacturing sector.

Conclusion

The restructuring agreement between Authum Investment & Infrastructure Limited and NITCO Limited represents a crucial step in turning around NITCO’s financial fortunes. By converting debt into equity, raising fresh capital, and acquiring real estate assets, NITCO is positioning itself for sustainable growth in the future. For Authum, this agreement strengthens its foothold in the manufacturing and real estate sectors, offering significant long-term potential. However, the consummation of the agreement depends on several regulatory approvals, and the exact shareholding could vary based on various factors.

This restructuring is likely to be a win-win for both companies, driving NITCO’s growth and providing Authum with a valuable stake in a promising enterprise.

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